See "great oxidation event" (2.4 billion years ago):

http://scholar.google.de/scholar?q=%22great+oxidation+event%22&btnG=&hl=de&as_sdt=0%2C5&as_vis=1

Oxygen was toxic for most of early life but cyanobacteria produced more and more of it. Thus some organisms evolved the capability to respire oxygen...

Thank you Michael. Thats what my question is why N2 was not used as respiring element although it was already there in the environment.

Nitrogen has five electrons in its outer shell and is, therefore, trivalent in most compounds. The triple bond in molecular nitrogen (N2) is one of the strongest resulting in difficulty of converting N2 into other compounds.

O atomic number is 8 : 1s2 2s2 2p4; N atomic number is 7: 1s2 2s2 2p3

Now, as you can see Nitrogen has half filled p-oribtal (since p-orbital can accomodate a maximum of 6 electrons and N has 3 in it), while Oxygen has 4 electrons in it. From Aufbau and Pauli's Exclusion principle we know that, Half-filled and Completely filled orbitals are most stable, hence N, which has half filled orbital will be more stable than Oxygen. So greater amount of energy will be required to knock of the valence shell electrons of Nitrogen THAN Oxygen, hence Ionization potential of Nitrogen is greater than Oxygen. Therefore, free N2 although abundant, living organisms cannot utilize it directly while oxygen can easily take part in metabolic reactions.

Correct. Evolution always takes place for more benefit or adjustments to survive. So, animals or a group of animals could adjust in a better way to utilize N2 in their metabolic pathways along with O2 or without O2 as plant developed such systems to utilize both O2 and N2. Was it not energetically costly for plants.

With the above context, the out put of utilizing N2 than O2 with more energy expenditure or more endothermic requirements could be resulted into more energy productive system than electrolysis, TCA cycle and electron transport system. Is not it???

May be I am asking a very very funny question.

My argument was that you have to consider the Precambrian context (2 billion years ago) of oxygen evolving into an agens of metabolism: Unlike atmospherical nitrogen the oxygen dissolved in oceanic water (where all early organisms lived) was distructive for early anoxic biota.

In order to survive high oxygen activities caused by cyanobacteria ("oxygen catastrophe" or "oxidation event") they had to find some way too metabolize the poisonous oxygen and thus mechanisms of oxygen respiration evolved.

So why bother about N2? - Unlike O2 it didn't hurt.

Many archaea use sulphur-derived compounds in their metabolism, which, like O2 is in group 6 and will react easily. Nitrogen was probably not originally used due to the fact that it requires more energy to break bonds (as Luna explains). Nitrogen in the atmosphere is triple-bonded and difficult to separate.

Did making O2 by photosynthesis (cyanobacteria) or O2 metabolism come first?

O2 is in H2O, which was abundant, and can be broken down by light, so was used by photosynthesising bacteria. Photosynthesis would have produced excess oxygen. This, as Michael and Biswaranjan said, was toxic to current micro-organisms living in the environment, so they would those that evolved a mechanism to cope with it would have survived. This mechanism would have had side effects of producing energy, which would also have increased survival.